Joules profits hit by "significant costs" but sales, brand awareness flourish

By

Nigel TAYLOR

Published
Feb 8, 2022

Having issued a profit warning at the start of February that sent its shares tumbling, the market braced itself for Joules Group’s interim results on Tuesday morning.

And the profits column for the 26-week H1 to 28 November didn’t make good reading. Pre-tax profits before adjusted items fell by £1.1 million to £2.6 million compared to the year to November 2020, while they were well below pre-pandemic 2019 numbers to the tune of £5.8 million.

CEO Nick Jones mostly blamed the “severe inflationary cost environment” for the earnings dip.

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To offset the bad news, Jones noted that Joules “has a clear plan of action to simplify the business, enhance efficiencies and mitigate the cost pressures that will enable the group to convert the strong levels of customer demand into sustainable, profitable growth.”

At least the positive message looked to have appeased investors who seemed unphased by the profits dip and its shares actually rose in early Tuesday trade.

And good sales numbers help. We know how consistently popular Joules is with its strong following of customers and its group revenues and brand awareness numbers didn’t disappoint.

Group revenues for H1 jumped 35% to £127.9 million with store revenue rocketing 80% to £35.5 million. Total e-commerce sales across the group's websites and third-party e-commerce partners increased 14% year-on-year and by 53% on a two-year basis.

Meanwhile Joules’ brand awareness increased two percentage points and by nearly three percentage points on a two-year basis to reach “record levels”. The number of active customers also increased by nearly 160,000 in the latest period to total over 1.9 million.

Gross margin inched up 0.2% to 50.4% on an improved mix of full-price sales and recovery of higher-margin store revenue. But this, of course, was offset by “significant" increases to freight costs and outbound Brexit duties and taxes. That meant operating expenses leapt by 52.6% to £52.2 million.

Jones added: “While we acknowledge that there are areas within the business where we need to simplify our operations and improve profitability, we remain very excited in our long-term growth prospects. 

“We have continued to see improvements in brand awareness and customer numbers, and we are confident that our broadened lifestyle proposition - which benefits from increased product and category diversification through Friends of Joules and Garden Trading - is more relevant than ever to consumers.”